£10,000 invested in Palantir stock 2 years ago is now worth…
Investing £10,000 in Palantir Technologies (NASDAQ:PLTR) stock two years ago would have been an extraordinary financial decision. Over that period, the stock has surged by an astonishing 858% in US dollar terms.
To put this into perspective, an initial £10,000 investment would have grown to approximately £95,800 before considering changes in the exchange rate between the pound and the dollar.
However, the British pound has strengthened against the US dollar during this timeframe, moving from an exchange rate of £1 = $1.28 to £1 = $1.37. When factoring in this currency appreciation, the value of the investment, when converted back to pounds, would be around £89,530.
This means that despite the pound’s strengthening, the investment still yielded a remarkable return, nearly multiplying almost ninefold.
It’s all about AI
The hype surrounding Palantir is rooted in artificial intelligence (AI). At its core, Palantir is a data analytics and AI company that specialises in transforming vast amounts of complex data into actionable insights.
Its technology is widely used by government agencies, including defense and intelligence sectors. This gives it a reputation for reliability and strategic importance. Beyond government contracts, Palantir has aggressively expanded into commercial markets, offering its data platforms to industries ranging from healthcare to finance.
This dual-market approach has fuelled optimism about its growth potential. Furthermore, Palantir’s origin story, co-founded by Peter Thiel, is shrouded in a degree of secrecy. This has added to its allure, creating a narrative of a cutting-edge tech company solving some of the world’s most challenging problems.
Valuation is… demanding
Despite the impressive stock performance and the hype, Palantir’s valuation metrics are bonkers. The company’s price-to-earnings (P/E) ratios, both trailing and forward-looking, are extraordinarily high compared to the technology sector median.
The forward non-GAAP P/E ratio stands at approximately 248, while the sector median is just under 24. This means Palantir is trading at more than 10 times the typical valuation of its peers. Other valuation measures, such as price-to-sales (P/S) and enterprise value to sales ratios, are similarly stretched. Palantir’s P/S ratio exceeding 100 compared to a sector median of around three.
Growth-adjusted metrics are still concerning. Palantir’s forward price-to-earnings-to-growth (PEG) ratio stands at 7.99, compared to the technology sector average of just 1.8. This means Palantir is valued at over four times the sector average relative to its expected earnings growth, highlighting how investors are paying a significant premium for its future prospects compared to typical tech companies.
The bottom line
While Palantir could prove to be a dominant player in a world where AI is even more prevalent than it is today, the company’s current valuation suggests that investors are betting heavily on its future growth. This introduces a huge amount of execution risk. Personally, it’s not a risk I’m willing to take. By investing in companies with less demanding valuation metrics, I’m protecting myself against losses. It may be worth considering at a cheaper valuation.
The post £10,000 invested in Palantir stock 2 years ago is now worth… appeared first on The Motley Fool UK.
But what does the head of The Motley Fool’s investing team think?
Should you invest £1,000 in Palantir Technologies right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Palantir Technologies made the list?
More reading
- £10k to invest? 3 investment trusts to target a £1,410 second income this year
- 7.3% and 8.6% yields! 2 dividend shares to consider in July to target a £1,200 passive income
- 1 penny stock to consider snapping up while it’s still under 10p!
- Start buying shares for £500? Here’s how – and some reasons why!
- I’ve been loading up on this cheap FTSE 100 share this week!
James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
